AT&T Will Spin Off WarnerMedia In $43B Discovery Merger

AT&T announced on Tuesday, February 1, that it will spin off WarnerMedia, home to HBO and CNN, in a US$43 billion deal to merge the property with Discovery, reported the Wall Street Journal.

The telecom giant also cut its dividend by nearly half, sending shares down over 6% in pre-market trading.

After the spinoff, AT&T stated it expects to pay an annual per-share dividend of about US$1.11, down from its most recent US$2.08 level. The new payout would cost the company just under US$8 billion a year, down from the roughly US$15 billion it paid out in 2021.

AT&T stated the change accounts for the media-asset distribution and supports the telecom company’s plans to boost investment in 5G wireless and fiber-optic service. Reducing the size of the dividend will also allow the business to more quickly whittle down debt. The company has said it will remain one of corporate America’s highest dividend-yield payers after the spinoff.

AT&T executives had said they would cut the dividend to reflect the company’s smaller size once the media business is carved out into a separate company. The stand-alone telecom company stands to get about US$43 billion in cash from the transaction, subject to certain adjustments.

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